June 6 (Bloomberg) -- Australia's economy grew at the fastest pace in more than three years, pushing the nation's currency to the highest since 1989 on expectations the central bank will raise interest rates to ward off inflation.
Gross domestic product rose 1.6 percent in the three months ended March 31 from the fourth quarter, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg survey of 26 economists yesterday was for a 1.2 percent increase.
The growth was driven by consumer spending and business investment as mining companies in the world's largest exporter of iron ore and coal expand to meet surging Asian demand, sending the jobless rate to a 32-year low. Rising demand may push the inflation rate back above the central bank's limit.
``It's boom time,'' said Shane Oliver, chief economist at AMP Capital Investors in Sydney. ``It's great news for the economy, but concerning for inflation and interest rates.''
Thirteen of 24 economists surveyed by Bloomberg News June 1 said the central bank will raise its benchmark interest rate by March next year. The Reserve Bank today left the rate unchanged at a six-year high of 6.25 percent.
The Australian dollar jumped to 84.24 U.S. cents at 12:26 p.m. in Sydney from 83.82 cents immediately before the report.
The yield on the benchmark 10-year government bond rose 3 basis points to 6.11 percent. A basis point is 0.01 percentage point. The yield on the December 90-day bank bill futures contract surged 7 basis points to 6.69 percent.
Inflation Fight
Gross domestic product, the total of all goods and services produced in Australia, rose 3.8 percent in the first quarter from a year earlier. Economists estimated 3.1 percent.
This year's pickup in spending and borrowing by households and companies may spur faster inflation, according to the Reserve Bank.
``All available data suggest high capacity utilization, a tight labor market and strong demand growth,'' the bank said in its May quarterly statement. ``Based on these trends, inflation is forecast to return to the top half of the target during 2008.''
Other central banks are raising rates to fight inflation. The European Central Bank in March raised its benchmark rate for a seventh time since December 2005. All 51 economists in a Bloomberg News survey expect another quarter-point increase to a six-year- high 4 percent when the bank announces a decision today.
The Bank of England's benchmark rate is at a six-year high of 5.5 percent after four increases in the past year, most recently on May 10.
Federal Reserve
The U.S. Federal Reserve hasn't raised its benchmark rate since June 2006, though it still considers inflation ``to be the greater risk,'' Fed Chairman Ben S. Bernanke said in March. Goldman Sachs Group Inc. yesterday dropped its forecast of a U.S. interest-rate cut this year.
Stoking the economy's expansion, business investment contributed 1.2 percentage points to growth in the first quarter, today's report showed. Consumer spending contributed 0.9 percentage point. By contrast, net exports subtracted 0.2 percentage point as imports climbed.
Mining and energy companies including BHP Billiton Ltd. and Rio Tinto Group have a record A$43 billion ($35 billion) of projects under way or close to starting construction, the government estimated in May.
Their investment has fueled a construction and engineering boom. Leighton Holdings Ltd., Australia's biggest construction company, plans to complete a record A$19 billion of projects within five years, and said in May its profit would rise 55 percent this financial year.
Hiring Boom
Construction companies, which employ one-tenth of the nation's workforce, have led the biggest hiring surge in almost 18 years, sending the jobless rate to 4.4 percent in April, the lowest since November 1974.
The buoyant labor market pushed consumer confidence to a record in May, and retail sales grew at the fastest pace in more than three years in the first quarter.
``These are the best and strongest retail conditions since we started 20 years ago,'' said Stephen Leibowitz, executive chairman of Retail Apparel Group Pty Ltd., which owns 140 menswear stores nationwide. ``The low jobless rate has boosted retail sales because consumers are positive.''
Home-building approvals jumped 8.1 percent in April, signaling a housing recovery may be under way.
The consumer spending surge hasn't yet triggered an inflation pickup. The rate was 2.4 percent in the first quarter, falling within the central bank's target for the first time in a year after the bank raised borrowing costs in May, August and November last year.
Core Inflation
The central bank targets an annual inflation rate of between 2 percent and 3 percent.
The bank forecasts underlying inflation, which strips out volatile price movements, will slow from the first-quarter rate of 2.7 percent to 2.5 percent in December, before accelerating to between 2.5 percent and 3 percent by mid-2008.
The chain price index, a measure of retail prices in the economy, climbed 4.3 percent in the first quarter from a year earlier, today's report showed.
Fourth-quarter economic growth was revised to 1.1 percent from 1 percent.
No comments:
Post a Comment